Mexico has a rigid legal system, where codification is the first and main instrument, with the Federal Constitution being the pre-eminent source of law. Mexico is a federal republic, where the federation and the states have specific jurisdiction (Competencia) determined by the Federal Constitution.

The Federal Judicial Branch is organised with the Supreme Court of Justice at the top, followed by the three magistrates courts, one magistrate court (appeal courts) and district courts (first instance).

The Supreme Court is a constitutional court, and the direct interpreter of the Federal Constitution.

The states are organised with an executive, judicial and legislative branch, each with their respective codes.

As a general rule, the Foreign Investment Law (FIL) allows foreign investors, and Mexican companies controlled by foreign investors, without prior approval, to:

• own up to 100% of the equity of Mexican companies;
• purchase fixed assets from Mexican individuals or entities;
• engage in new activities or produce new products;
• open and operate establishments; and
• expand or relocate existing establishments.

The only exceptions to this general rule are those expressly established in the FIL itself, and certain limitations concerning the direct ownership of real estate in the country.

The aforementioned exceptions refer to economic activities that are:

• reserved to the Mexican State;
• reserved to Mexican nationals or Mexican companies without foreign equity participation;
• subject to quantitative foreign investment limitations; and
• subject to prior approval if the foreign investor intends to own more than 49% of a company engaged in port services to vessels engaged in interior navigation, such as towing and mooring, naval companies using vessels exclusively for high-seas traffic, etc, (as further explained below).

Activities Reserved to the Mexican State

The FIL reserves certain strategic areas to the Mexican State. No private investor may engage in:

• exploration and extraction of petroleum and other hydrocarbons;
• planning and control of the national electricity system as well as the public service of transmission and distribution of electricity;
• nuclear energy generation;
• radioactive minerals;
• telegraphs;
• radiotelegraphy;
• mail service;
• issuance of money;
• control, supervision and security of ports, airports and heliports; and
• certain others expressly indicated under the corresponding legislation.

Activities With Foreign Investment Equity Limitations

The FIL establishes foreign ownership limits in certain companies, activities and types of shares, as set forth below:

• up to 10% production of co-operatives;
• up to 49% production and sale of explosives, firearms, cartridges, munitions, fireworks, excluding the purchase and use of explosives for industrial and extractive purposes, and the preparation of explosive mixtures for use in such activities;
• printing and publication of newspapers for exclusive distribution within Mexico;
• Series “T” shares of companies owning agricultural, cattle-raising and forest lands;
• freshwater and coastal fishing, and fishing in the exclusive economic zone, excluding aquaculture;
• comprehensive port management;
• piloting services for vessels engaged in interior navigation;
• shipping companies that operate commercial vessels for navigation in interior waterways and between domestic ports, excluding tourist ferries and the exploitation of dredges and naval devices for port construction, maintenance and operation;
• supply of fuel and lubricants for ships, aeroplanes and railroad equipment;
• certain telecommunication services depending on the reciprocity that exists in the country of the ultimate parent of the potential investor; and
• domestic (regular and non-regular) and specialised air transport and air-taxi transport.

These limits may not be surpassed either directly or through any type of agreement or corporate structure or scheme, except through a particular type of shares, called “neutral” shares that are regulated by the FIL.

Activities Where Foreign Investors Require Prior Approval of the National Commission of Foreign Investments (the “Commission”) to Own More Than 49%

Under the FIL, prior approval is required for foreign investors to own more than 49% of a company engaged in any of the following activities:

• port services to vessels engaged in interior navigation, such as towing and mooring;
• naval companies using vessels exclusively for high-seas traffic;
• companies authorised to operate public airdromes;
• private schools, at the preschool, primary, secondary, preparatory and higher education levels;
• legal services; and
• construction, operation and exploitation of railways as well as public railroad transportation services.

Some of the limitations identified in this section may be overruled by express provisions in free trade or other commercial treaties entered into by Mexico.

Articles 8 and 9 of the FIL provide that prior authorisation from the Commission must be obtained when foreign investors intend to participate, directly or indirectly, with more than 49% of the shares of a Mexican company whose assets exceed a certain amount determined each year by the Commission. For 2022, this amount is approximately MXN19.5 billion.

In order to obtain authorisation from the Commission, an application must be filed. The application mainly consists of a filing explaining the details of the underlying investment, together with responses to a standard questionnaire providing certain information to the Commission with respect to the type of investment to be made in Mexico, and evidence of the benefits for the Mexican economy. Additionally, support documentation is required to be enclosed with the application, such as:

• a copy of the annual report or the audited financial statements for the previous fiscal year of the foreign investor;
• the incorporation documents (such as formation certificate, tax ID) of the foreign investor (in case of legal entities); and
• a copy of the receipt of the filing fees’ payment.

After the above-mentioned documents have been filed, the Commission will issue a resolution within four months.

Parties that fail to notify and implement a transaction without obtaining previous authorisation from the Commission are subject to fines ranging from, approximately, MXN84,480 to MXN422,450. Additionally, pursuant to Article 37 of the FIL, transactions can be nullified, and will not have any legal effects on the parties or third parties.

The Commission construes the obligation of obtaining this authorisation to apply only when foreign investment will participate in an entity for the first time. Thus, if the target company has foreign investment participating in excess of 49%, no authorisation is required for the transfer of such participation to another foreign investor.

On the other hand, if the foreign investor is seeking to acquire real property in a Mexican restricted zone through a trust agreement, the approval from the Ministry of Foreign Affairs (Secretaría de Relaciones Exteriores) is required for banks to acquire, as trustees, rights to real estate located within the restricted zone – namely the zone within 100km of borders, and 50km of the Mexican coast, when the main purpose of the trust is to allow the use and exploitation of such assets without constituting real estate rights over them, and the beneficiaries are: (i) Mexican companies without a foreigner’s exclusion clause; and (ii) foreign individuals or foreign legal entities.

Also, all foreign investors and Mexican companies with foreign investment are subject to registration before the National Registry of Foreign Investment (Registro Nacional de Inversiones Extranjeras or RNIE). Upon registration before the RNIE, periodic reporting obligations arise, and failure to comply with these obligations may trigger the imposition of fines.

Upon filing the required authorising documentation with the Commission, the target company must complete an application under which the company commits to comply with the following obligations.

• The creation of a training and hiring program, in which it must indicate the number of employees hired during the first three years of its operation in Mexico:
1. in this regard, Article 7 of the Mexican Labor Law establishes that any entity (understood as Mexican entities or foreign entities with a permanent establishment) should hire at least 90% of Mexican employees;
2. in relation to professional and technical services, as a general rule, the target company shall only employ Mexicans; and
3. if, however, there are no Mexican qualified personnel to perform those professional or technical services, the target company may hire foreign employees, as long as the number of foreign employees does not exceed 10% of the company’s professional employees.
• Complying with the relevant environmental legal and regulatory frameworks, as well as filing the applicable environmental licences and/or permits granted by the competent authorities.
• Complying with the Antitrust Law, as well as to offer, in the case of the sale of goods and services, fair prices in accordance with the applicable laws and regulations.
• Paying the applicable taxes (ie, income tax, for Mexican companies or foreign companies with a permanent establishment in Mexico) to the Mexican tax authorities.

After the target company files the corresponding application containing the above-mentioned commitments, the Commission will either approve or deny the investment.

As a general rule, any entity (understood as natural or legal persons) who is established or is located in Mexican territory can challenge any resolution issued by the Mexican authorities as long as those resolutions constitute a legal substantive violation or a human rights violation.

Depending on a case-by-case analysis, the competent judicial branch to resolve the dispute can be determined. The judicial branches that can resolve denials of authorisations by the Commission are as follows.

Administrative Ordinary Remedies Before Federal Courts

Regarding federal administrative ordinary remedies, the affected party may file an appeal for revocation or a nullity trial, as follows:

• The affected party may decide to challenge the foreign investment denial resolution by filing a recurso de revocación (appeal for revocation). This appeal shall be filed with the hierarchical superior authority of the authority that issued the negative resolution (resolución materia de impugnación). The hierarchical superior authority should issue a new resolution that either revokes or declares the validity of such an administrative act within four months.
• Alternatively, the relevant resolution could be challenged before the Administrative Judicial Court of Law (such as the Tribunal Federal de Justicia Administrativa) through a nullity trial, as long as the investment denial constitutes any of the violations contained under Article 51 of the Federal Administrative Litigation Procedure Law (Ley Federal de Procedimiento Contencioso Administrativo).

Constitutional Appeal (Amparo) Procedure

If the investment denial resolution violated human rights/constitutional guarantees under the Mexican Constitution, the affected party can file a constitutional appeal before the competent Collegiate Circuit Courts (Tribunales Colegiados de Circuito). The affected party can file the following extraordinary remedies:

• Amparo directo – this constitutional appeal may only be filed after the affected party has challenged the resolution by administrative ordinary remedies (principio de definitividad) and the resolution issued by the Tribunal Federal de Justicia Adminsitrativa still constitutes a human rights/constitutional guarantee violation.
• Amparo indirecto – the affected party may decide to either directly file this constitutional appeal or challenge the decision before the federal courts through an administrative ordinary remedy. However, if human rights/constitutional guarantees were violated, the relevant grounds for challenge will first be through amparo indirecto.

In Mexico, the General Law on Commercial Companies (Ley General de Sociedades Mercantiles, GLCC) provides for several types of structures in which a company may be organised. However, the main – and most commonly used – forms are the following:

• Sociedad Anónima (SA), which is a stock corporation;
• Sociedad de Responsabilidad Limitada (S de RL), which is a limited liability company; and
• Sociedad Anónima Promotora de Inversión (SAPI), which is an investment promotion stock corporation regulated by the Securities Market Law (Ley del Mercado de Valores) and also by the GLCC (only with respect to matters not expressly regulated by the Securities Market Law).

Pursuant to the GLCC, each of the foregoing must be incorporated by at least two individuals or entities, each of whom/which must subscribe to at least one share/partnership interest.

Additionally, pursuant to the GLCC, each of the above-mentioned forms of companies may adopt the variable capital form, whose amount may be unlimited. Generally, adopting such modality will allow companies to increase and decrease their variable portion of the capital stock through an ordinary shareholders’ or partners’ meeting, in which case an amendment to the by-laws would not be required.

As a general formality, the incorporation of a company is formalised by appearing before a Mexican notary public who attests to the incorporation (as briefly described further below).

• Sociedad Anónima (SA) – the shareholders’ liability is limited to their shares or capital contribution. The management is entrusted to a sole administrator or a board of directors. The surveillance of the stock company is entrusted to an auditor or a surveillance committee who will supervise the operations of the company.
• Sociedad de Responsabilidad Limitada (S de RL) – the partners’ liability is limited to the payment of their respective equity contributions. The management is entrusted to a sole manager or a board of managers, and in this form of company there is no legal requirement to appoint an auditor/surveillance committee.
• Sociedad Anónima Promotora de la Inversión (SAPI) – the shareholders’ liability is limited to their shares or capital contribution, the management is entrusted to a board of directors and the surveillance to an auditor or a surveillance committee who will supervise the operations of the company.

Together with the SA, the SAPI is widely used as a vehicle to invest in Mexico because of its flexibility in corporate governance.

The main steps regarding the incorporation process of a company (the “NewCo”) are the following:

• Requesting authorisation to use the corporate name with the Ministry of Economy (Secretaría de Economía).
• Choosing the type of entity (eg, SA, S de RL, SAPI).
• Preparing the by-laws of the NewCo, which include, among other items, the following:
1. duration of the NewCo;
2. the corporate domicile;
3. the total capital stock/equity interest issued and paid;
4. the corporate purpose;
5. the appointment of the sole director/manager or a board of directors/managers;
6. the appointment of the auditor/surveillance committee; and
7. the overall corporate governance of the NewCo.
• Obtaining the RFC (tax ID) for the NewCo.
• Registration of the NewCo in the National Registry of Foreign Investment (RNIE), if applicable.
• Additional permits and registrations – a variety of post-incorporation registrations, authorisations and permits may be needed depending on the nature of the activities to be performed by the NewCo, including registration before the Mexican Institute of Social Security (Instituto Mexicano del Seguro Social), the Institute of the National Housing Fund for Workers (Instituto del Fondo Nacional de la Vivienda para los Trabajadores), and Local Payroll Taxpayers’ Registries (Padrones Estatales de Impuesto sobre la Nómina).

Once the notary public has all the information requested (eg, KYC information), the incorporation process could take an estimated one to three weeks for the incorporation deed to be issued and recorded in the Public Registry of Commerce by the notary public.

As provided for in the GLCC, once a year companies must hold their annual shareholders’ or partners’ meeting, and specifically for the SA and the SAPI, such an annual meeting should take place within four months following the end of each fiscal year (ie, from January through April of each year).

Likewise, as provided in the GLCC, the board of directors shall submit an annual report to the shareholders’ meeting on the operations and the accounting policies observed by the NewCo, and include financial statements at the end of each fiscal year.

Companies that have foreign investment need to be registered before the RNIE and comply with the annual economic report and quarterly report filings, if applicable.

Additionally, from a tax perspective, for non-resident shareholders of a Mexican resident company, the shareholders may use a generic tax identification number for purposes of shareholder registry records. In this case, within the first three months immediately following the close of each fiscal year, the company must file the list of non-resident partners or shareholders who choose not to register with the RFC.

Pursuant to the provisions of the recently amended Federal Fiscal Code (FFC) and the Miscellaneous Tax Ruling for 2022 (MTR), when incorporating the NewCo, the identification of the controlling parties (as provided in Article 32 B Quarter of the FFC) of the shareholders/partners of the NewCo is mandatory. The person in charge of applying this rule will, in most of the corresponding cases, be the notary public who will assist those who wish to incorporate a Mexican legal entity.

The shareholders’ or partners’ meeting, as a supreme body, is empowered to elect, re-elect, and remove the sole director/manager or the board of directors/managers, as applicable. While management of an SA and an S de RL may be entrusted to either a sole administrator or to a board of directors, whose members may or may not be shareholders/partners of the company, management of a SAPI shall always be entrusted to a board of directors.

Additionally, the sole director/board of directors may establish committees to support and aid the board in its various duties (eg, audit committee, compensation committee).

In general terms, directors are bound to follow and implement the instructions received from the shareholders’ or partners’ meeting and to comply with the duties imposed on them under applicable law and the by-laws of the company. Directors have a general duty to perform their activities prudently and with the same care they would ordinarily take in their personal affairs, and where a director that, in any given matter, has a conflict of interest in relation with the company, such a director must disclose the nature of the conflict to the other directors, and refrain from participating in any resolution in connection therewith.

Additionally, directors have confidentiality obligations with respect to non-public information of the company.

Regarding the corporate veil, any legal entity recognised by Mexican law has a different and independent legal personality and capacity, assets and liabilities from those of its shareholders/partners or holding entity. However, a few judicial precedents suggest that the corporate veil might be pierced under certain specific circumstances.

The rules governing the employment relationship are enshrined in law, collective bargaining agreements and employment agreements.

Under the Mexican legal framework, an employment relationship can be established without the need for an employment contract, generating the same effects and consequences. An employment relationship can be established when there is a relationship of superordination and subordination, and when there is remuneration. An employment contract is a contract whereby a person agrees to work, in return for remuneration, for another person in a subordinated manner.

Working conditions should be in writing, and the document should contain, among others, the following:

• name, nationality, age, sex, marital status, Unique Code of Population Registration (CURP), Federal Taxpayer Registry number (RFC) and address of the employee and employer;
• whether the employment relationship is for a specific work, fixed period, seasonal period, initial training, or for an undetermined period and, if that is the case, whether the employment is subject to a trial period;
• the services that must be rendered;
• the place or places where the work should be provided;
• the duration of the working session (jornada de trabajo);
• day and place of payment of salary;
• other working conditions such as rest days, vacations and any other condition stipulated by the employer and the employee.

It is important to emphasise that the lack of a written document containing the above-mentioned working conditions will not deprive the employees of the rights arising from the labour laws and the services rendered to the employer. In any case, the employer will be considered responsible for the lack of a written document.

An employment relationship may be for a specific work, fixed period, seasonal period, and undetermined period. It may also be subject to a trial period or initial training.

The Federal Labour Law regulates working sessions (jornada de trabajo) of eight hours per day maximum. Where it is a daytime working session, the maximum hours of work are eight; if  a night-time working session, the maximum hours of work are seven; and if a mixed working session, the maximum hours of work are seven and a half. It is important to note, however, that the law also contemplates the payment of a salary per worked hour.

Overtime hours should be paid at double the regular hourly rate of the working period.

The Federal Labour Law contemplates the causes for the termination of an employment relationship as follows:

• mutual consent of the employer and employee;
• death of the employee;
• termination of the specific work or expiry of the fixed period of work;
• physical or mental incapacity, or inability to render the required services;
• a force majeure or fortuitous event that is not attributed to the employer;
• inability to pay for the work;
• the depletion of the natural resource in the case of extractive industries;
• bankruptcy and insolvency.

The employer or the employee may terminate the employment relationship at any time without responsibility only in the specific circumstances mandated by the Federal Labour Law. In this case, the employer shall pay the corresponding indemnification to the terminated employee:

• If the employment relationship is for a fixed period and less than a year, the amount equivalent to the salaries of half of the period of the services rendered to the employer is paid. If the employment relationship exceeds a year, the amount equivalent to the salaries of six months for the first year and 20 days for each of the following years in which the services were rendered to the employer is paid.
• If the employment relationship is for an undetermined period of time, the indemnification shall be for the amount equivalent to 20 days of salary for each year of services.
• In addition to the aforementioned indemnifications, the employee may request, before the conciliatory authority or tribunal, an indemnification for the amount of three months’ salary.

If the employer terminates the employment relationship and it does not fall under any of the specific circumstances contemplated by the Federal Labour Law, the employer must additionally pay outstanding salaries since the date of the termination, up to a maximum period of 12 months.

The Federal Labour Law refers to collective redundancies as a consequence of the closing of businesses or the definitive reduction of their workforce. Pursuant to Article 434 of the Federal Labour Law, collective redundancies may occur in the event of a force majeure or fortuitous event that is not attributed to the employer, inability to pay, the depletion of the natural resource in the case of extractive industries, and bankruptcy and insolvency. In these cases, the employees are entitled to receive an indemnification of three months’ salary and the seniority premium.

There is no obligation to employers to consult employees regarding the organisation of the company, business model, etc. Nonetheless, employees must be informed regarding relevant decisions which may affect their job conditions, etc.

Income Tax

Individuals receiving income in the context of an employment relationship are subject to income tax at progressive rates that range from 0% to 35%.

Employers are required to withhold the corresponding tax from salary payments and remit it to the Mexican tax authority on a monthly basis.

Social Security Quotas

Employers and employees are required to make contributions to the social security system.

To that effect, employers must withhold the applicable quotas from salaries and remit such quotas to the Mexican Social Security Institute (IMSS) and the Institute of the National Fund for Workers’ Housing (INFONAVIT).

These contributions are determined based on specific percentages applicable to items of social security coverage (ie, labour risks, maternity and illnesses, life and disability, retirement and severance due to old age, childcare and social benefits, and contributions to INFONAVIT) and daily salary amounts, which are subject to caps.

Local Payroll Taxes

Employers making payments to individuals under an employment relationship are obliged to pay a local payroll tax to the state in which the employment relationship occurs or labour is performed. Such tax is determined by the total salaries paid by the employer in the respective state. Payroll tax rates vary from 0.5% to 3%, depending on each state.

Income Tax

Mexican resident companies are required to pay a federal income tax on worldwide income regardless of the location of its source. The current corporate income tax rate is 30%. There are no local or municipal income taxes.

Income tax is determined by applying the corporate tax rate to the company’s tax result. The tax result is determined by subtracting the authorised deductions from all items of taxable income.

Expenses, to be deemed as deductible, must satisfy general requirements (eg, being “strictly indispensable” for the business activity of the taxpayer) and specific requirements based on the nature of each expense.

Authorised deductions include returns, discounts and rebates on sales, cost of goods sold, expenses and capital expenditures (ie, depreciation or amortisation of fixed assets, deferred expenses, and deferred charges), among others.

Non-resident companies are required to pay income tax in Mexico on all income that is attributable to a permanent establishment located in Mexico or on all income obtained from Mexican sources.

In general, Mexican source income obtained by non-Mexican tax residents is subject to withholding tax. In the absence of tax treaty provisions, the following withholding tax rates apply.

• Dividends: 10%.
• Interest: 4.9%, 10%, 21%, 35% or exempted (depending on the personal characteristics of the recipient of the interest or of the payer of the interest as well as the characteristics of the loan or instrument generating the interest).
• Capital gains: 25% (on gross income) or 35% (on net gains).
• Salaries: Exempted (up to MXN125,900); 15% (up to MXN1 million); 30% (more than MXN1 million).
• Independent personal services: 25%.
• Directors’ fees: 25%.
• Rental income: 25%.
• Royalties: 1% (for the right to use certain aircraft); 5% (for the right to use certain railroad cars and vessels); 25% (for the right to use other goods and technical goods); and 35% (for the right to use patents, trademarks, commercial names and others).

The income tax must be paid on an annual basis; however, taxpayers have the obligation to submit monthly estimated income tax payments, which are calculated based on the current year’s revenues multiplied by a “profit factor” determined by the prior year’s figures (taxable income/total revenues).

Once a corporation has paid the income tax, after-tax earnings may be distributed to the shareholders with no additional tax charge at the corporate level. However, if the distribution is made in favour of an individual or a non-Mexican tax resident, the payment will be subject to an additional 10% dividend tax, which must be withheld by the distributing company.

Net operating losses may be carried forward for a period of ten years. No carry-back is allowed.

Value-Added Tax

The Mexican value-added tax (VAT) is a consumption tax that is applied to the importation of goods, the sale of goods, the rendering of independent services and the use of goods. The general VAT rate is currently set at 16%.

The VAT is meant to pass along each phase of any good’s production process. Thus, taxpayers will, in general terms, be entitled to credit the input VAT against the output VAT. VAT-favourable balances or VAT due must be submitted before the tax authority on a monthly basis by filing a VAT return. VAT-favourable balances may be requested in a refund or may be credited against future VAT collections.

Special Tax on Goods and Services

The special tax on goods and services is an excise tax that sets forth a specific tax rate per each type of good, comprising the production, sale or import of goods, including tobacco, alcoholic beverages, certain fuels, pesticides and food with high caloric content.

Incentives and tax credits are as follows:

• Northern Border Region incentive – taxpayers carrying out business activities in the Northern Border Region may apply an income tax credit equal to one third of their tax liability and a 50% VAT reduction to activities carried out within the said border. This incentive is effective until 2024.
• Tax credits for contributions to certain projects – subject to specific limitations and requirements, taxpayers may obtain an income tax credit for contributions to investments projects related to movie production, theatrical productions, edition and publication of literary works, research and development, and investments in equipment for the supply of power to electric vehicles in public places.
• 100% deduction in investment in machinery and equipment for the production of energy from renewable resources.
• Exemption to capital gains realised by residents of countries that have entered into a tax treaty with Mexico on certain sales of shares and other equity instruments in the Mexican stock market.

There is an optional income tax consolidation regime that allows a partial consolidation of income of corporate groups. However, due to its restrictions and limitations, most companies in Mexico do not elect to file consolidated tax returns.

There is a three-to-one debt-equity ratio limitation on the deduction of interests deriving from intercompany loans. Interests that exceed such a ratio are non-deductible.

In line with BEPS Action 4 (Limiting Base Erosion Involving Interest Deductions and Other Financial Payments), a fixed ratio rule applies in Mexico, limiting a company’s net interest expense deduction to 30% of the company’s EBITDA. Interests that are non-deductible pursuant to this rule may be carried forward for ten years. A de minimis rule applies under which this limitation is applicable only to annual net interests exceeding MXN20 million.

As an OECD member, Mexico has adopted transfer pricing legislation recognising the arm´s-length principle. In general, Mexico has been an active adopter of the OECD’s transfer pricing standards as set forth in the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and in BEPS Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting).

GAR

The Mexican Federal Tax Code sets forth a general anti-avoidance rule. The rule sets forth a business purpose test as a standard to be applied by tax authorities in the tax review of transactions that generate tax benefits.

Under this rule, tax authorities may recharacterise transactions that lack a business reason or may disregard such a transaction if they consider that they do not have real economic substance.

MDR

Taxpayers and tax advisers are obliged to disclose to tax authorities certain transactions if they generate a tax benefit in Mexico and meet any of the hallmarks listed in the Federal Tax Code. The mandatory disclosure requirements (MDR) are based on the European Union’s DAC6, with important differences.

In Mexico, the Federal Competition Law (FCL) sets forth that a Concentración is the merger, acquisition of control or any act by virtue of which companies, associations (JVs), shares, trusts or assets in general are made between competitors, suppliers, customers, or any other economic agent.

When certain parameters are reached, before a merger is fully executed, the operation must be approved by the Antitrust Commission.

Pursuant to the FCL, the following need the approval of the Antitrust Commission:

• when the amount of the Concentración exceeds the threshold of 18 million times the UMA (Standard Unit of Measure);
• when the Concentración results in the accumulation of 35% of the shares or assets of an economic agent whose sales exceed 18 million times the UMA; and
• when the Concentración exceeds the amount of assets or shareholder equity by 8.4 million times the UMA, in the event of the annual sales of the economic agents being over the threshold of 48 million times the UMA.

The parties must file a petition before the Antitrust Commission, which must review the relevant market, to rule out a possible anti-competitive effect. The Commission can request any information from the filing parties or even third parties regarding the Concentración, and when all the information is rendered to the satisfaction of the Antitrust Commission, a ruling is approved with certain conditions, or a denial of the Concentración is rendered within 60 working days.

Once a Concentración is approved, the ruling will be valid for a period of six months, which can be extended once by the same duration.

The FCL sets forth that any agreement between competitors is forbidden (competitors agreement) and will be punished. The specific conducts covered are:

• fixing, raising, arranging or manipulating the sale or purchase price of goods or services at which they are offered or demanded in the markets;
• establishing the obligation not to produce, process, distribute, market or acquire but only for a restricted or limited quantity of goods, or the provision or transaction of a restricted or limited number, volume, or frequency of services;
• dividing, distributing, allocating or imposing portions or segments of a current or potential market of goods and services, through customers, suppliers, specific times or spaces;
• establishing, agreeing or co-ordinating positions or abstentions in tenders, contests, auctions or coins; and
• exchanging information with any of the objects or effects regarding the above-mentioned conducts.

It is important to point out that the legal framework sets forth that an anti-competitive agreement must be deemed unlawful per se. Thus, there is no room for an interpretation in favour of pro-competitive effects around an anti-competitive agreement (rule of reason).

The sanction for carrying out a competitors agreement could be (i) up to 10% of gross revenue in the specific year, or (ii) criminal and administrative sanctions for the individuals who committed or were instrumental to the competitors agreement.

Under the FCL framework, there will be an abuse of dominant position involving an economic agent with substantial market power (as determined case-by-case by the Antitrust Commission) in the event of:

• unilateral pricing or market segmentation;
• vertical restrictions for pricing to distributors or producers;
• an unlawfully conditional sale;
• tied sales;
• unilateral refusal to sell to a specific person;
• boycotting;
• abuse of the market power to sell services or goods under its medium cost of production;
• the use of economic position to offer a specific price to buyers in order to compel them to buy from another competitor;
• crossed subsidies;
• price differentiation for two buyers in equivalent conditions;
• unilaterally or jointly raising the productive process to other competitors;
• unilaterally or jointly restricting access to an essential facility; and
• narrowing of margins.

It is important to differentiate from the cartel or competitors agreement where the sanctioning is per se; with abuse of market power the economic agent has the burden of proof for showing its conduct provides efficiencies to the relevant market in order to avoid sanctions. 

A patent confers on the patentee an exclusive right to use an invention. A patent is granted for a non-renewable period of 20 years. The application for registration of a patent should be filed before the Mexican Institute of Industrial Property (IMPI). The IMPI will carry an initial examination of the formal requirements of the application and, if the application is approved and the corresponding fees are paid, the IMPI will publish the application in the Official Gazette.

For a period of two months after the application is published, the IMPI may receive observations from any person regarding the compliance of the application with the requirements established in the law. Once the application is published, the IMPI will initiate a revision of the merits of the application, considering, if necessary, the information received as a result of the publication of the application.

Where there is no impediment, the IMPI will grant the patent to the patentee, which will be subject to the payment of the corresponding fees. Once granted, the patent will be published in the Official Gazette. The IMPI may initiate a “Procedure of Administrative Declaration” ex officio or upon the request of a party, and impose sanctions. The Federal Tribunals will have jurisdiction over civil, commercial, or criminal controversies, without prejudice to the right of the parties to agree to an arbitration procedure.

Holders are given the exclusive right to affix the trademarked sign to the goods and offer them for sale or in the course of trade. The registration will be valid for a period of 10 years and be renewable for the same duration. In order to obtain the registration, an application should be filed before the IMPI with the payment of the corresponding fees.

The IMPI will publish the application in the Official Gazette and will grant a period of one month to receive observations or comments by any person regarding the application. When the deadline for observations and comments expires, the IMPI will analyse the merits of the application and grant a period of two months to the petitioner to state its position. Once the proceeding is concluded, the IMPI will issue a resolution granting or denying the trademark. The resolution should be published in the Official Gazette.

The IMPI may initiate a “Procedure of Administrative Declaration” ex officio or upon the request of a party, and impose sanctions. The Federal Tribunals will have jurisdiction over civil, commercial or criminal controversies, without prejudice to the right of the parties to agree to an arbitration procedure.

The holder of the registration of an industrial design has a temporary exclusive right to use the industrial design. The registration is valid for five years and renewable for up to 25 years. 

The application for registration of an industrial design should be filed before the IMPI. The IMPI will carry out an initial examination of the formal requirements of the application and, if the application is approved and the corresponding fees are paid, the IMPI will publish the application in the Official Gazette. Once the application is published, the IMPI will initiate a revision of the merits of the application. Where there is no impediment, the IMPI will grant the registration of the industrial design and, once granted, it will be published in the Official Gazette. 

The IMPI may initiate a “Procedure of Administrative Declaration” ex officio or upon the request of a party, and impose sanctions. The Federal Tribunals will have jurisdiction over civil, commercial or criminal controversies, without prejudice to the right of the parties to agree to an arbitration procedure.

A copyright grants the author of a literary, artistic or scientific work exclusive moral and economic rights over the work. The economic rights over the work will be valid during the author’s life, 100 years after their death and 100 years after being published. Moral rights are granted to the author in perpetuity.

The application for registration should be filed before the National Institute of Copyrights (INDAUTOR), which is in charge of the Public Registry of Copyrights. The INDAUTOR will determine the resolution of the application within 15 days. The inscription in the Registry is only declaratory, and not constitutive of rights. Once the inscription is made, the applicant will have 30 days to request the corresponding certificate. 

The INDAUTOR is in charge of the enforcement of copyrights. Federal Tribunals will have jurisdiction over copyrights; however, when controversies arise between private parties, they may choose State Tribunals or an arbitration procedure to solve the controversy. When the controversy is regarding an official communication or act of the INDAUTOR, the Federal Tribunal of Administrative Justice will have jurisdiction.

IP rights over software are protected by the Federal Law of Copyright on the same terms as for literary works. Unless otherwise agreed, economic rights over computer software belong to the employer when the software is created by one or several employees in the performance of their functions, or following the instructions of the employer. The holder of the economic rights of the software may, among others, authorise or prohibit:

• its permanent or provisional reproduction;
• translation, adaptation or modification of the program;
• any form of distribution; and
• the public communication of the program.

Databases that constitute intellectual creations are protected by the Federal Law of Copyright on the same terms as compilations. Such protection does not extend to the data and materials contained in the database. Databases that do not constitute original work are, however, protected in their exclusive use for a period of five years. The holder of economic rights over the database may, among others, authorise or prohibit:

• its permanent or provisional reproduction;
• translation, adaptation or modification of the program;
• any form of distribution; and
• the public communication of the program.

Trade secrets are protected by the Federal Law for the Protection of Industrial Property. The person in control of the trade secret may convey the trade secret or authorise the use of it. The authorised person has the obligation to maintain the confidentiality of the trade secret. A person or entity that by any immoral or unlawful means obtains information containing a trade secret will be held accountable.

The Constitution of Mexico, in Article 6 Section A Subsection II, recognises data privacy as a human right and protects all information as relates to a person’s private life and personal data through the laws of Mexico.

Likewise, in Article 16 paragraph 2, the Constitution establishes that “[...] every person has the right to the protection of their personal data, access, rectification and cancellation of the such data, as well as to express their opposition, in the terms established by law, which will establish the exceptions to the principles that govern the data processing, for reasons of national security, public order, public safety and health or to protect the rights of third parties [...]”

However, the laws that regulate data privacy specifically are recent. Data protection is mainly regulated through two federal laws.

First, the Federal Law for the Protection of Personal Data in possession of Private Parties (the FLPPDPP) was issued in 2010. Article 5 of the FLPPDPP establishes that in the absence of an express provision in the FLPPDPP, the Federal Code of Civil Procedures and the Federal Law of Administrative Procedures will be applied; and for issues related to procedures for the protection of rights, verification and imposition of sanctions, the provisions contained in the Federal Law of Administrative Procedures will be applied.

Second, the Federal Law for the Protection of Personal Data in possession of Regulated Entities (the FLPPDRE) was issued in 2017. Article 9 of the FLPPDRE establishes that “in the absence of an express provision in this law, the Federal Code of Civil Procedures and the Federal Law of Administrative Procedures will be applied.”

Mexico considers that the right to the protection of personal data includes the right of the owner of such data to;

• access;
• rectify;
• cancel; and
• oppose their data.

These are known as the ARCO rights.

Access refers to the right that people have to receive details about the handling of their data.

Rectification can be used in the event that the data is inappropriate, and the owner has the right to request its correction.

Cancellation will apply when data is not being lawfully processed, and the owner will have the right to request the deletion of the information.

Opposition refers to the right users have to object to the processing of their personal information.

These are the main laws applicable to data protection in Mexico.

The FLPPDRE is a law that only applies to Mexican regulated entities; as such, its purpose is to establish the basis and procedures for granting the right of protection of personal data in Mexico. A foreign company targeting customers in Mexico would not have to abide by this law. However, if an international company has business in Mexico and provides information to a Mexican regulated entity, such an entity must comply with the FLPPDRE.

The FLPPDPP, conversely, and according to its rules of procedure, will apply to any company that:

• is located in Mexico;
• processes information by software that works on behalf of a data processor located in Mexico; or
• uses means of processing located in Mexico.

Thus, any company that falls within the three above-described categories will have to abide by the FLPPDPP and will have to grant the right of protection of personal data in accordance with the ARCO rights.

The National Institute for Transparency, Access to Information and Personal Data Protection (the INAI) is the autonomous constitutional agency that guarantees access to public information and the protection of personal data.

In relation to access to public information, the INAI guarantees that any federal authority, autonomous bodies, political parties, trusts, public funds and unions, or any person who receives public resources or performs as an authority, delivers the public information to anyone who requests it. As for the protection of personal data, it guarantees the proper use of personal data, as well as the exercise and protection of the rights of access, rectification, cancellation and opposition that anyone has in relation to their information.

The role and authority of the INAI is set forth in Chapter VI Section I of the FLPPDPP.

Article 38 of the FLPPDPP provides that the INAI will have the purpose of disseminating knowledge of the right of protection of personal data in Mexico, promoting its exercise, and monitoring the compliance of provisions set forth in the FLPPDPP and those that derive from it – particularly those related to the fulfilment of obligations by the entities regulated by this law.

Further, Title 8 Chapter I of the FLPPDRE establishes the way in which the INAI should be organised, and the laws that regulate it. It provides that “in the integration, appointment procedure and operation of the Institute [the INAI] and the Council shall be in accordance with the General Law of Transparency and Access to Public Information, the Federal Law of Transparency and Access to Public Information and any other applicable regulations.”

The main reforms subject to discussion in the Mexican Congress are two constitutional reforms; one in the electoral field, and the other in public security.

It is foreseeable that the remainder of the present administration will cover modifications to tax legislation and energy.